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Most American's spend more than they earn, and I may understand the reason. Today, companies are flooding our world with advertisments (TV, radio, internet, mobile, billboard, etc...) with the goal of convincing us to buy products we don't really need. Those who don't understand the power behind marketing end up buying when we should be saving. Unnecessary purchases cause many of us to live paycheck to paycheck, or worse rack up credit card debts. Rather than be responsible savers and set aside a percentage of income for a rainy day, many of us go out and over-spend on discretionary purchases (not mandatory for survival) such as:
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Pricey Electronics (cell phones and game consoles, etc...)
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Costly Services with Monthly Fees (cell phone plans, cable plans, etc...)
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Entertainment (movies, clubs, bars, shopping, etc...)
Everyone's financial situation is different, but everyone's financial end goal should be the same. To set aside money from every paycheck to pay down credit card debt (or save in a bank if you don't have credit card debt). Everything not set aside for saving should be spent first on non-discretionary purchases and fees like rent and food. Finally, whatever is left can be spent on discretionary purchases. The hard fact is it may require you to cut back on certain conveniences. If you are living paycheck to paycheck, answer the following question:
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Do you really need to buy that brand new $200 cell phone?
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How about that $70/month cell phone plan?
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What about that $10 for one movie ticket ($40 for a family of 4)?
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How about $200/month Comcast (TV and Internet) service?
Many (but not all) services and products exist with a price premium because of convenience. But what if you could save money each month? In the examples above, I'll provide alternatives and cost savings over 2 years:
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Almost every carrier has phones offered for FREE with a 2 year contract. (SAVE $200 over 2 years)
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In the US, Verizon has the absolute best coverage. But how often are you going to visit the middle of the country? Sprint and T-Mobile both offer competitive cell phone plans with comparable coverage in major cities. Additionally, services like Ting and Republic Wireless offer plans as cheap as $20/month. (SAVE $1200 over 2 years)
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You can rent movies from RedBox (read why I Love Redbox) for $1 and watch it at home. And store bought popcorn and soda is much more affordable! Plus, you can pause, talk, and answer the phone without disturbing others at a movie theater. (Assuming your family of 4 watches one movie a month at a theater, SAVE $936 over 2 years)
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Can anyone watch all those channels? If you downgrade to a more appropriate number of channels and internet speeds, you can pay roughly $80. (SAVE $2880 over 2 years)
In my example above, you can save roughly $5216 over 2 years (and we haven't even compared dining out vs cooking)! And a major point is to cut back on services that have a monthly fee. If you feel you must splurge (and we all should, once in awhile), go ahead and buy that new iPhone or Android, and cut back on Internet and Cable at home. Once you've paid off all your credit card bills, school loans, and other debt, invest that money to "make money while you sleep".